Fast Company

From Country Boys to Big Cheese

The two execs behind Cabot Cheese run an agricultural co-op based in Vermont. They're also tough guys who appreciate quality -- and love profit.

This is the story of Vermont's other power couple. Just like Ben Cohen and Jerry Greenfield, Paul Johnston and Richard Stammer have built a thriving national dairy brand: Cabot cheese. And like Cherry Garcia and Chunky Monkey, Cabot's products succeed thanks to their quality and a marketing strategy that plays to the notion of Vermont purity.

That's where the similarities end. Unlike their counterparts, Johnston and Stammer aren't conflicted about making a profit. They love efficiency. And their shirts? Snowy white, not tie-dyed.

Even so, they're a pretty odd couple. Johnston is the streetwise president of Agri-Mark Inc., the dairy cooperative in Methuen, Massachusetts that took control of Cabot, another co-op, in 1992. A gravelly voiced smoker, Johnston got his start bagging powdered milk and was promoted to plant manager at 24. "Most of the guys I worked with did only one thing," he says. "But I learned every piece of equipment in that plant."

Johnston is a demanding boss; even his marketing director calls him "blunt, sarcastic, tactless, and tough." That has turned out to be the right stuff for the farmer-owners of Agri-Mark, the 14th-largest dairy co-op in the country, with revenue of $520 million in 2000.

Stammer is the yin to Johnston's yang. While Johnston was rising through the business side of milk, Stammer was digesting dairy as a professor of agricultural economics at Rutgers. Cerebral and gracious, Stammer is one of the few people who understand the byzantine dynamics of milk prices. He joined Agri-Mark in 1982 as chief economist. Twelve years later, Johnston named him president and CEO of Cabot.

The choice stunned the board at Agri-Mark. But the PhD turned around Cabot (which had been failing) without replacing any senior management. "The big change was figuring out how to let people go do their best," says Stammer.

Together, Johnston and Stammer have increased Cabot's revenue fivefold to about $175 million, and its cheese is sold up and down the East Coast. But the big surprise has been Cabot's tasty profits -- between $6 million and $8 million in 2001, compared with about $1 million annually when Agri-Mark took over.

In growing the company, Johnston and Stammer have aced a perennial test: how to get big without letting quality slip. Cabot ages its cheese naturally, instead of using lots of enzymes to speed up the process, which means that the cheddar must sit in warehouses for up to a year to achieve its rich, full-bodied flavor. But therein lies Cabot's vulnerability: The price of each 640-pound block of cheddar is pegged to the price of milk when it goes into the warehouse. And milk prices, as any dairy farmer will tell you, can be more volatile than those of crude oil.

That puts enormous pressure on Cabot's profit margins. "There's a pretty good temptation to play around with enzymes," says Stammer. "If you can put out an extrasharp cheddar in 5 months instead of 12, you're less likely to get stung by a spread in the price of milk."

But natural aging is what separates Cabot from, say, Kraft. And so Cabot sits on 25 million pounds of cheddar, while Johnston and Stammer try to predict how much cheese the company will sell a year from now. "We have a lot of what-if forecasts of where we want to be," Stammer says. "But in the end, much of this business comes down to instinct." With his usual bluntness, Johnston puts it this way: "If we screw up, good-bye profits."

Learn more about Cabot Cheese on the Web (www.cabotcheese.com).

Sidebar: She Moves Their Cheese

As a dairy cooperative with name-brand products, Cabot must answer to two masters. Farmers own the company, and they need their milk money. Then there is the brand, which requires constant investment in order to grow.

No one is better at pleasing both masters than Roberta MacDonald, Cabot's senior vice president of marketing. Cabot's acquisition by Agri-Mark gave the cheese maker more money to pay for slotting fees at grocery chains. But Cabot's marketing budget is still minuscule compared with those of bigger competitors, MacDonald says. So she's learned how to stretch her resources in innovative ways.

The trick, MacDonald says, is to "get the right people in the right places to try the cheese." From time to time, for instance, MacDonald deploys guerrilla marketers who dress up in cow outfits and urge grocery-store customers to sample the product. Also, Cabot makes donations to food banks, which draws attention to the company's farmer-to-consumer model.

A hometown appeal informs the Cabot marketing approach. Local sports teams are often referred to in Cabot ads. After the Tennessee Lady Volunteers won the NCAA women's basketball championship, MacDonald ran a radio ad in Knoxville about Cabot's selection as the best cheddar in the country: "Like the Lady Volunteers, Cabot cheddar ranks first."

"We can't afford to go broad, so we try to go deep instead," MacDonald says. "We research everything right down to the backyard."

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